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Financing green transition

Bridging the investment gap for green recovery of small tourism businesses in the HKH

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The shocks of climate and the pandemic have demonstrated the vulnerability of the tourism economy in the HKH. As we scramble to recover, there is a growing consensus that building resilience to climate and other shocks should be part of the green recovery, especially for small businesses – or small and medium size enterprises (SMEs) – worst hit by these crises.

However, tourism continues to be a blind spot in terms of the multilateral and bilateral climate finance required for green transition and meeting net zero targets. In Nepal, the government’s tourism green growth strategy is part of its nationally determined contributions (NDCs), highlighting an urgent need to mobilise both public and private finance to meet these targets.

To bridge this investment gap, an entrepreneur-led sustainable business incubation service centre – the Tourovation (Tourism + Innovation) Hub was launched in Nepal. In 2021, the Hub helped tourism entrepreneurs find innovative ways to integrate renewable energy and energy efficient solutions into their operations and secure finance to accelerate transition to low carbon tourism enterprise. The curated and bankable business plans – with clear environmental and social benefits, and profitability – provided a strong business case and confidence for banks to finance. Since there are no dedicated funding bodies and mechanisms investing in greening tourism SMEs, we used an innovative approach to channel funds from financial intermediaries for these tourism SME-specific business plans. Innovative investment through deployment of finances specific to tourism SMEs can help bridge the investment gap for green recovery.

Based on these business plans, two SMEs – Himalayan Companion Treks and Expeditions, and Sanskriti Farm and Research Centre – were able to raise a total of NPR 3.3 million from major commercial banks, bridging the investment gap for their green recovery. This is a template that can be replicated in other HKH countries to help in the green recovery of tourism SMEs.

Tourism continues to be a blind spot in terms of the multilateral and bilateral climate finance required for green transition and meeting net zero targets

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